Lactalis has pledged to make its milk pricing system more “transparent” in the wake of a threat by Dutch authorities to impose financial penalties for non-compliance with industry codes.
The Netherlands Authority for Consumers and Markets (ACM) has accused cheese producer Royal Lactalis Leerdammer of “unfair commercial practises” in violation of the so-called Wet OHP Landbouw act.
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In essence, the ACM has lodged a complaint against Lactalis Leerdammer for changing milk prices in pre-agreed contracts. It follows a similar complaint from a “supplier association of dairy farmers” – Leerdammer Collectief – according to a statement from the Dutch competition body.
The Authority has given Lactalis Leerdammer, which emerged from the 2021 acquisition deal of Leerdammer between the French dairy major and peer Bel Group, three months to comply with the Dutch act.
Otherwise, the business faces a penalty of up to €1.05m ($1.2m).
“ACM orders Lactalis Leerdammer to change its supply agreement relating to the milk price, for example by including a transparent and objective pricing system,” the statement read.
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By GlobalData“Lactalis Leerdammer will subsequently have to submit the amended conditions to the milk suppliers for approval so that negotiations on these conditions can still be held.”
In turn, Lactalis Leerdammer made a commitment yesterday (23 September) to start talks with Dutch dairy farmers to “develop a more transparent milk pricing system”.
However, the French group said it will need more than the three months specified by the ACM to achieve that objective. And Lactalis Leerdammer said it will seek a review of how the Authority interprets the Act
“This legal step is independent of Royal Lactalis Leerdammer’s willingness to make the milk pricing system more transparent. We hope that the end result will lead to a new standard in the sector,” the company said in its own statement.
Jan Verbessem, the general manager of Lactalis Leerdammer, added: “We have been operating as a local production company in the Netherlands for over 100 years and are producing cheese to the highest standards. We predominantly use milk sourced from our Dutch dairy farmers, whose milk largely determines the quality of our cheeses sold worldwide.
“A good and open collaboration with the dairy farmers is therefore of great value to everyone involved. For this reason, Royal Lactalis Leerdammer is taking steps to make the milk pricing system more transparent.”
Following the Leerdammer Collectief complaint, the ACM conducted its own investigation and found Lactalis Leerdammer “violated the prohibition on the unilateral change to the terms of a supply agreement”.
Lactalis Leerdammer was accused of setting the monthly milk price paid to farmers without discussions taking place between the parties. The ACM determined, therefore, that farmers “are unable to decide in the short term to stop supplying milk” and have to accept the prices offered.
The Dutch case is not the first in which Lactalis has been accused of unfair trading practices.
Earlier this year, the French group was fined in Italy following a complaint lodged by the main farmers’ association Coldiretti in terms of the price paid to farmers for their milk.
And in 2022, a court ruled against Lactalis in a case brought by Australia’s competition authority for breaches of the country’s dairy code of conduct, including the early termination of agreements.
